This research consists of six chapters. The first chapter introduces the subject of the research, describes the research problems and objectives of the research, psents the scope and limitations of the research, proves the significance of the re-search, shows the definition of the main concepts and clarifies the structure of the research. In the second chapter the competitive advantage for industries is psented, and time-based competition literature is reviewed. The third chapter re-views the business opportunity of time in fulfilling customer demand and propos-es three main hypothpropos-espropos-es for further tpropos-esting. The fourth chapter dpropos-escribpropos-es the ap-proach of the research, environment of the conducted research, sources of the acquired data, methodology of the data collection, methods of data analysis, data interpretation, and the validity and reliability of the analysis. The fifth chapter presents the results of the tested four hypotheses in three different case firms. The sixth, and last, chapter introduces the conclusions of the case study, compares the case firms with others, indicates the managerial implications and proposes future research areas.
2 TIME-BASED LITERATURE REVIEW 2.1 Literature review approach
This chapter concentrates on the conceptual context of time as a competitive characteristic, namely reviewing the literature on time-based competition and the impact of order delivery speed on the firm´s profitability. The chapter presents an overview of relevant previous research on how time has been used and what prior research has claimed in terms of the impact of time on businesses in general.
A review of existing literature in this study is divided into two parts. Section 2.2 discusses briefly the link between time and manufacturing processes with case examples and introduces some of the most known techniques and approaches that emphasize the importance of time in manufacturing. In Section 2.3 the literature review is taken deeper into time-based manufacturing and competition. This is done by using Harzing’s Publish or Perish tool. Section 2.4 focuses on different literature approaches that try to quantify the benefits of time and the impact of time on other areas of performance. Section 2.5 introduces the basic requirements for building competitive advantage. In Section 2.6 the literature review studies different manufacturing strategies. Here, the focus is on how the re-balancing of the different manufacturing capabilities could build competitive advantage. Sec-tion 2.7 summarizes the literature review and presents research gaps in terms of this dissertation.
2.2 Time as an approach for creating competitive advantage
Time is often a common aspect in sources of advantage when firms continually search for the elusive combination of resources and capabilities that yield differ-ential financial performance (Thomas 2008). A number of firms like AT&T, General Electric, Hewlett Packard, Northern Telecom, Toyota and Seiko have all recognized the importance of shorter delivery lead times in providing strategic advantage (Bowel et al. 1988). In 1986, Northern Telecom discovered something important about their company. They found that all the things that were vital to their long term competitiveness had one thing in common; time. Every improve-ment they wanted to make had something to do with squeezing time out of their processes. Suddenly, it was very clear that what they needed to do to satisfy their customer needs was the ability to do things faster. Ever since, the people at Northern Telecom did not ask the question: “How much will it cost to deliver a
quality product, and how long will it take?” Instead, the question they asked was:
“How quickly can we deliver a quality product, and how much will it cost?”
(Merrills 1989).
Time as strategic competitive dimension emerged from manufacturing that dates back to the late 19th century, when Frederick Taylor proposed the use of time study to improve productivity. In his approach each job was divided into smaller elements, and each element had standard time, which was determined by time study experts. (Niebel 1998). Later, Henry Ford successfully embedded these techniques into his automotive assembly lines and developed the world’s most efficient and timely system for producing cars (Bockerstette and Shell 1993). In the early 1980s, Toyota developed a system for producing small quantity produc-tion that eliminated waste and reduced costs. The success of this system intro-duced a revolutionary just-in-time (JIT) and automation with human touch con-cepts for manufacturing practices (Ohno 1978, 1988).
In most business environments time can be argued to be one of the key characters and indicators of a company’s success. It seems that companies need greater ca-pabilities to respond more quickly to market dynamics and varying demand (Fer-nandes and Carmo-Silva 2006). Technological advances created the means for measuring the impact of time, and growing global competition and continuously changing customers’ behavior have led manufacturing firms to the constant evo-lution of competitive paradigms. For this business environment, time-based com-petition has emerged as the basic competitive paradigm since 1990 (Porter 1980;
Hum and Sim 1996; Alasoini 2007). However, time itself is not a new concept.
Over two decades ago, in 1988, George Stalk Jr., stated in the article “The Time Paradigm” that: “Time is a secret weapon of business”. Although the statement is old and certainly no secret anymore, time and responding fast to customer needs is secretly used by some of the most successful businesses today. These firms provide leverage by means of speed. The growth rate of these businesses has been claimed to be at least three times as fast as their industries and earns profits of more than twice the average of their competitors (Stalk & Hout 1988).
2.2.1 Toyota Production System, lean and time
Researchers such as Liker (2004); Womak, Jones, Roos (1990); Shimokawa and Fujimoto (2009) have claimed that the time-based approach originates in mid-20th century Japan. Womack coined the term lean production to describe the approach which was initiated by Toyota Production System (TPS) in Japan (Womack, Jones and Roos 1990). Shimokawa and Fujimoto (2009) claimed that TPS was developed in the 1940s, 1950s and 1960s at the Toyota car manufacturing plant in
Japan. Several researchers have claimed the TPS was introduced to the western world as lean production, and that it started rapidly to partly replace the philoso-phy of mass production introduced earlier by Henry Ford (Womack, Jones and Roos 1990; Liker 1998; Shimokawa and Fujimoto 2009). However, Holweg (2007) sheds new light on the development of TPS and lean manufacturing. He has taken the research outside the comfort zone of previous western approaches and provided evidence which indicates that Toyota’s production managers (e.g.
Kiichiro Toyoda, Taiichi Ohno, and Eida Toyoda) have integrated elements of the Ford system in a Japanese environment, creating a hybrid system that was neither purely original nor totally imitative.
It was the 1970s and 1980s when Toyota caught the world’s attention (Levinson and Rerick 2002; Liker 2004); however, it was not in terms of progressive car designs or performance, though the ride was smooth and design was often very refined. “It was the way that Toyota engineered and manufactured the autos that led to unbelievable consistency in the process and product…Toyota designed the autos faster, with more reliability, yet at competitive cost, even when paying the relatively high wages of Japanese workers.” Despite the faster speed and higher wages, “Toyota is far more profitable than any other auto manufacturer.” (Liker 2004). According to Holweg (2007), there are six critical points that will explain the blossoming of Toyota at that time:
1. Cost advantage: Japan was seen to have lower wage rates despite the claims from Liker (2004). The local currency rate against the dollar and lower cost of capital were the elements that created a relatively “unfair playing field”.
2. Luck: Fuel efficient cars by Toyota during the energy crisis.
3. “Japan Inc.”: Japan’s Ministry of International Trade and Industry was sus-pected of setting a large-scale industrial policy.
4. Culture: The difference between Japanese culture and many others allowed for more efficient production.
5. Technology: The use of highly automated production.
6. Government policy: Trade barriers against the U.S., less strict labor laws, and a national health care program lowered the overall labor costs in Japan.
Whatever the reasons behind Toyota’s success actually were, the foundation of the operational success of lean production was on the elimination of waste. It in-cluded elimination of all forms of waste in processes, including waste of work-in-process (WIP) and finished goods inventories, which are the earmark of mass production (Womack, Jones and Roos 1990; Liker 1998; Levinson and Rerick
2002). By the elimination of waste, lean production focused heavily on reducing the cycle time between customer order and shipping date. (Womack, Jones and Roos 1990; Liker 1998).TPS is the basis for much of the “lean production”
movement, which has been one of the manufacturing trends dominating for the past 10 years or so (Liker 2004). The basic principles of lean production pointed out by Womack and Jones in their book “Lean Thinking” (2003) define it as a five step process: “Defining customer value, defining the value stream, making it
“flow”, “pulling” from the customer back, and striving for excellence.” The five step process focus is on ensuring the product flow through value-adding processes without interruption. (Liker 2004). The same was said by the founder of TPS, Taiichi Ohno, even more succinctly: “All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes.” (Ohno 1988).
“Managing time has enabled top Japanese companies not only to reduce their costs, but also to offer broad product lines, cover more market segments, and up-grade the technological sophistication of their products” (Stalk 1988). Looking at the impact of the TPS and lean principles at Toyota, the advantages of the princi-ples are clear. According to Womack et al. (1990), Toyota was not only faster in time among other compared car manufacturers, but had superior performance with fewer defects, used assembly space, inventory turn rate, and other related indicators in the past. However, in the past two to three years Toyota has had several quality related setbacks. They have recalled in total over eight and half million cars globally due to reasons like hybrid braking, accelerator pedals and slipping floor mats (Browning 2010).
2.2.2 Time-based competition
Stalk (1988) was the first to introduce the concept of time-based competition (TBC) in his article “Time – the next source of competitive advantage”. In his Harvard Business Review article he highlighted the importance of time in creat-ing competitive advantage. Later in 1990, Stalk and Hout published the book
“Competing against Time”. This was the first to exclusively focus on time-based competition. In 1993, Stalk and Webber were the first to warn about the dark side of time-based competition. According to Stalk and Webber (1993), the negative impact of time-based competition is inevitable when it is applied blindly without knowing how to make time a competitive advantage.
The main strategy of time-based competition (TBC) is to use speed for competi-tive advantage. The company uses this strategy to deliver product or services
fast-er than the competitors (Suri 1998). Time-based manufacturing has been proven to be a successful way of creating ‘unfair’ competitive advantage over competi-tors by companies like Wall Mart. Stalk and Hout (1990) claim that time-based competitors can offer greater varieties of products and services, at lower costs and in less time than their more pedestrian competitors. Lead-time has been shown to be an important factor for today’s markets. Lead-time in product development and in delivering the product or service to the customer plays a significant role in competition. (Stalk & Hout 1990). Thus, a number of researchers have been try-ing to point out the benefits that time-based competition can have on the bottom line. Stalk & Hout (1990) argue that every quartering of time reduces costs as much as 20 percent. Either due to the confidentiality of the research cases or lack of research on real numbers, the number of benchmark cases on different kinds of electrical equipment and appliance manufacturing has been limited. One of the approaches to indicate numbers that the firm can expect when implementing a time-based approach has also been studied within an approach called Quick Re-sponse Manufacturing (QRM).
2.2.3 Quick response manufacturing
Other researchers such as Suri (1998) studied the competitive advantages of time at the end of the 1980s. Suri combined academic research on time-based competi-tion and his own observacompeti-tions from various lead-time reduccompeti-tion projects. Alt-hough Suri’s QRM is rooted in same principles as Stalk’s time-based competition, QRM focuses on manufacturing operations, whereas time-based competition can be applied to any business, including banking, insurance, hospitals and food ser-vice.
QRM dates back to the 1980s. Its roots, as well as the roots of lean production and TBC, can be found in Total Quality Management (TQM). The main differ-ence between TBC and QRM is that whereas TBC strategy can be applied to any businesses, QRM is most effective in manufacturing operations that make a large number of product specifications with low-volume and highly variable demand and (or) highly engineered products in small batches, or even one-of-a-kind prod-ucts. QRM thus sharpens the focus of TBC. (Suri 1998)
“QRM is a companywide strategy that pursues the reduction of lead time in all aspects of a company’s operations” (Suri 2004). The company’s operations can be divided into external and internal lead time reduction operations. External lead time reduction focuses on customers’ needs by rapidly designing and manufactur-ing products customized to customer specific needs. The advantage of short order lead time to produce and deliver the customer order not only refers to
manufactur-ing - it typically includes all steps from receivmanufactur-ing the customer order until the customer receives the product or service (Suri 1998).
2.2.4 Summary of time
“Think about the time, all the time.”
Conner 2001 Listening to the ways in which managers talk about what is important to the suc-cess of their firms, we hear response time, lead time, up time, quality and being on time. Sometimes time may be an even more important parameter than money.
(Stalk and Hout 1990). These three approaches briefly discussed in this chapter are probably the most known approaches that focus on time. For all of them, time and time management are critical. In all approaches time was claimed to create competitive advantage for firms focusing on the described time-based practices.
In the following section research on time-based impact is studied in more detail.
2.3 Time-based literature review
The time-base literature review was performed by reading relevant articles in the field of time-based manufacturing and time-based competition. A lot of the arti-cles were linked to the researchers introduced in the previous section; however, the software tool, Publish or Perish, was used for retrieving and analyzing the most relevant literature. In conducting the analysis, Harzing’s Publish or Perish tool uses Google Scholar to obtain the citation data and presents the following statistics:
– Total number of papers – Total number of citations
– Average number of citations per paper – Average number of citations per author – Average number of papers per author – Average number of citations per year – Hirsch's h-index and related parameters – Egghe's g-index
– The contemporary h-index – The age-weighted citation rate
– Two variations of individual h-indices
– An analysis of the number of authors per paper.
The actual search in this study was conducted by using the search word “time-based competition”. The search had three limitations. The first was to limit the search to the fields of business, administration, finance and economics. The se-cond limited the search words to title words only. The third limited the searches to different time spans. The first search with no time restrictions on publication indicated that the most frequently cited researchers were quite few in number and mostly from the 1990s. Here, the dominant names were Stalk (2003), Blackburn (1991) and Blackburn (1992). A closer look at the fourth most cited article by Chris (1993) indicated that it was not from the area of this research. The fifth most frequently cited, Hum (1996), was actually a literature review of earlier re-search. As Table 1 indicates, the research area of time-based competition has real-ly onreal-ly been explored by a handful of acknowledged researchers with more than 50 citations.
Table 1. Top 20 cited “Time-based competition” publications.
The second search using Harzing’s Publish or Perish software tool with time limi-tation for publications from 2006 to 2011 indicated quite meagre results. As seen in Table 2, the top 20 articles were cited in total 31 times. The two most cited publications, Askernazy et al. (2006) and Thomas (2008), focus on two different areas. Askernazy et al. focus on incentives of reactivity and why such comple-mentarities happen at the industry level, while Thomas (2008) explores time-based pressure in supply relationships. Tammela et al. (2008) discuss cultural aspects and time-based management and compare logistics management practices between selected countries. It is noteworthy that there are very few case studies in real operational business niches such as electrical equipment and appliance manu-facturing.
Table 2. Top 20 cited “Time-based competition” publications from 2006 to 2011.
The results shown in Tables 1 and 2, as well as searches with words like “quick response manufacturing” and “Toyota production system” all indicated that the publications are relatively old. Only a handful of significant publications were from the 21st century. Looking more closely at the most cited publications in Fig-ure 6, it appears that some of the most frequently cited literatFig-ure focused on re-viewing earlier research. Thus, it can be said that published research in this field has been fairly limited. As such, this indicates that research in this area would
require new investigation to conceptualize the role of time and the actual ad-vantages of time-base approaches for today’s business environments.
2.4 Quantifying the benefits of time
“Everyone knows that time is money, but time is actually a lot more money than most managers realize”
Suri 2010 In the information society of today, every business activity is eventually measured in terms of money. Top management loves to hear about savings like inventory reductions, scrap rate reduction and labor savings. These kinds of numbers can easily be traced back to the bottom line. Also the efficient use of time has been said to be one of the greatest indicators of competitiveness (Conner 2001). It has been even claimed that firms that cut the lead times from their value-delivery sys-tems experience remarkable performance improvements like reductions in cost (Stalk and Hout 1990). Some have even shown that lead time is correlated with financial performance indicators, such as ROI or average profit (Christensen et al.
2007), which underscores the importance of managing lead time (Glock 2011).
As such, it is obvious that the development of a methodology to measure time as a
As such, it is obvious that the development of a methodology to measure time as a